February 3, 2022

Building Mojaloop – Part 2: Birth of the Real-Time Payment Core, Supporting Hub Operators, and Driving Participation

by Dr. Warren Carew in Financial Inclusion , Mojaloop , Open Source , Payment Management 0 comments

In the first part of this article, we focused on the significance of open source design for Mojaloop – the world’s first open source software for interoperability in real-time payment systems. In 2016, we joined the Bill and Melinda Gates Foundation and other industry leaders, including Ripple and Dwolla, to design Mojaloop. Today, we are focused on supporting payment hub operators and driving participation among financial institutions connected to a Mojaloop network. Here, we’ll share some key learnings from our experience over the years. 

The Mojaloop RTP core solution emerges

In 2017, Mojaloop was introduced to the world, providing the first open source, real-time clearance and settlement management engine. From that point, Mojaloop started to gain traction quickly with commercial partners like Mowali (a joint venture mobile money operator created by Orange and MTN) and institutional partners to support national and sub-national solutions. Most of the development work that went into Mojaloop was centered around the hypothesis that adopters would be existing payment hub operators currently running real-time payments (RTP) solutions and that the API-led-designed Mojaloop could be easily integrated into their existing business and technical processes. 

In reality, we found that legacy payment hub operators were understandably skeptical of a groundbreaking solution that, up to this point, had yet to prove its place in the market. Additionally, existing hubs built on older, proprietary technology were more complicated to integrate with Mojaloop than initially estimated. 

However, the team discovered that there had always been a greenfield opportunity – the need for a more complete offering in the center, where central banks and their national operators can adopt the solution. The opportunity proved to be a significant turning point for Mojaloop and the inception of today’s Mojaloop RTP core.

Supporting hub operators

Existing payment hub operators used antiquated, proprietary solutions that pre-dated the generation of purpose-built software that easily integrates. However, new organizations like Mowali often operate independently of their parent organizations, which requires an independent and complete solution. For Mowali, we developed a minimal viable product that has formed the cornerstone of their service since 2018.

Building such a system is extremely challenging, requiring coordination and resources, even with modern technology like Mojaloop. We found that working with others in the industry provided a greater likelihood of delivering an enhanced outcome for Mowali. The result is a community-supported, API-led core platform proven deployable into existing solutions and operational services exposed through modern UX, such as Sybrin Nitro and MIFOS

The Mowali project illustrates the power of the open source community working together. For example, development work on a critical element of the solution benefited from improvements on earlier versions. Mowali had sponsored the original code development but was enhanced during a UNCDF-sponsored initiative in Myanmar as a joint project between ModusBox and Thitsaworks. That initial investment returned full circle to Mowali as it was able to take advantage of the refined solution. Additionally, the company implemented a business operations framework resulting from funded development by Sybrin, the Gates Foundation, and others. 

Today, we help Mojaloop hub operators provide the digital rails upon which financial services are built. This is where the solution for financial inclusion begins.

Connecting financial institutions

Interoperability is at the heart of the Level One Project’s thesis on financial inclusion. We have witnessed the adverse consequences of isolated, closed-loop solutions and experienced the benefits of ubiquitous, open access. However, interoperability achieves nothing without connected financial institutions (FIs) and payment providers participating in the system and sustainably operating the service.

The tricky thing about enabling participation in a real-time payment network is that you often work with smaller organizations that lack the technical resources needed to connect to modern, sophisticated payment networks. As a result, much of the challenge working in this sector is around educating and standardizing processes that uplevel participating FIs to a certain level of technical capability. However, financial inclusion will fail if these FIs are forced to upgrade their back-end technology to a level meant for big US banks. We specifically designed Mojaloop to facilitate impedance matching between organizations to avoid this negligence.

Our team supported the onboarding process for the first organizations to transfer real funds through Mowali’s Mojaloop-enabled switch. This provided invaluable first-hand experience with the complexities of the security model and the challenges of connecting to an asynchronous API solution from legacy core financial platforms. 

Driving participation with financial institutions

This collective experience with FIs and hub operators drives us to evolve adjacent solutions to the Mojaloop core. Payment Manager OSS standardizes the onboarding experience for FIs while Connection Manager handles the onboarding and security key management for payment hub operators.

The objective of Payment Manager is to reduce the cost and complexity of participation. We built Payment Manager to increase participation efficiency by ensuring that it was…

  • Modular. Community members can use the components they need. For example, an FI with a Sybrin or Ericsson core might natively support Mojaloop but want to leverage the connector component for managing its security features.
  • Complete. There are no hidden costs (tariff barriers) for small FIs.
  • Frictionless. This minimizes the onboarding cost, time, and required skills for FIs and hub operators. 
  • Transparent and Observable. This allows for local resolution or maximum information for dispute resolution and reconciliation support to quickly understand where a transfer might have gone wrong.
  • Deployable. On-prem capability for self-hosted solutions and cloud-native modes.

For FIs, there is a one-time, direct cost to use Payment Manager to connect and onboard into a Mojaloop system plus the ongoing cost of supporting the software. However, we believe that to support viable RTP participation and sustainable financial inclusion, low ongoing participant costs must pass on affordability to end customers. The initial Mojaloop onboarding process is relatively complex because it was designed to reduce risk and disputes later on, driving low operating costs. 

Start today with open source Payment Manager

Earlier this year, we introduced an open source version of Payment Manager. The site includes links to the repo in GitHub, full solution code, and documentation. Several technology partners such as Coil, Applied Payments, Thitsaworks, other hub operators, FIs, and system integrators are currently utilizing the solution. Our goal is for the solution to be merged with the Mojaloop structure in the future. And, if you are interested in supporting the participation effort today, please join in. 

We are available to assist any organization that is beginning this journey. If you would like to learn more about open source Payment Manager, available support contracts, and how we can help your organization, please contact our team today.

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